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Do you know how much you are forking out as a policyholder for commission and administration costs on a 20-year policy? A fortune, according to the experts.
With escalating commission and administration costs, along with your monthly premiums, you end up paying thousands of rands to brokers over that period.
Lenerd Louw, chief executive of South Africa's first direct life insurer - 1Lifedirect, says some brokers have been collecting about 22,5percent commission a month on the life insurance policies they sell and some even as high as 50percent.
If you pay a premium of R300 a month on a 20-year credit life policy, Louw says a broker's commission would be as much as R16200.
A sigh of relief is that investigations into commission practices are already under way, thanks to the new National Credit Act (NCA).
Experts say there is nothing more important than emphasising your rights when it comes to the new act.
The new law which came into effect in June, aims to create a fair and non-discriminatory credit market and ensures that credit providers lend money in a responsible manner.
It also aims to educate and help people make more informed choices.
The act gives you the right to choose who you would like to insure yourself with and emphasises the importance of shopping around for the cheapest quote for the most appropriate cover.
This means that you should not allow financial providers to give you a limited choice in terms of selecting an insurer, especially those who force consumers to take out a credit-life policy with their own in-house insurance division.
According to Louw, the NCA and the Long Term and Short Term Insurance Acts protect you from financial providers who dictate to you as to who you should buy insurance from when applying for loans or credit.
You have the right to shop around and choose an insurer who best suits your needs and budget, emphasises Louw.
He says it is necessary that you know all the costs involved in your intended credit agreement and even hidden fees and commissions have to be fully disclosed.
This transparency is certainly in your best interests so make sure that you defend it, he says.
Louw's advice to consumers wanting to buy credit life cover or whole life cover is: Do your homework before settling on any particular policy from any particular insurer.
This includes getting comparative quotes and comparing the level of cover the insurers offer.
Insist also that the insurer illustrates the costs included in the monthly premiums as well as explains the fees charged for anything over and above that.
In addition, request details on commission percentages and a proposed estimate of the commission amount to be paid, at least for the first two to five years of the policy, advises Louw.
Make sure that you are thoroughly informed before signing on the dotted line.
Remember, finance providers are not allowed to bully you into choosing any particular insurer.
So shop around for insurers who charge the least amount of commission. By buying direct, you cut out brokerage commissions and fees and save up to 22percent on monthly premiums, says Louw.